The European Central Bank hiked interest rates on Thursday by 50 basis points to 2.5%, as expected, in the face of surging inflation.
The Bank said that based on “the substantial upward revision to the inflation outlook”, it expects to raise them further.
“In particular, the Governing Council judges that interest rates will still have to rise significantly at a steady pace to reach levels that are sufficiently restrictive to ensure a timely return of inflation to the 2% medium-term target,” it said.
The Bank now expects inflation in the eurozone of 6.3% next year, up from a previous forecast of 5.5%, while the forecast for 2024 was pushed up to 3.4% from 2.3%. The ECB also set its first estimate for inflation in 2025, at 2.3%.
The ECB followed in the footsteps of both the US Federal Reserve and the Bank of England.
Earlier, the BoE announced its ninth rate hike in a row, raising rates by 50 basis points to 3.5% – the highest level since the financial crisis in October 2008.
On Wednesday evening, meanwhile, the Fed also bumped rates up by 50 basis points, as expected. Although this marked a slowdown in hikes, with the Fed having lifted rated by 75 basis points at each of its last four policy meetings, the central bank also adjusted up its expectations for rate rises next year.
